Hasbro seemed to be an unstoppable business juggernaut, but a critical Bank of America analyst report stating that Magic: The Gathering is oversaturated has led to a serious stock downgrade.
Magic: The Gathering is one of the most successful gaming brands of all time. After Hasbro purchased Wizards of the Coast, Magic: The Gathering and Dungeons & Dragons have proven to be very lucrative. The Magic: The Gathering franchise has even expanded to mobile gaming with the MTG Arena video game. They are literally worth billions to the company, from the revenue of the main products as well as licensing and associated merchandise.
But is Hasbro shooting itself in the foot by the overproduction and making unpopular decisions related to the Magic: the Gathering brand? Check out the details below for more.
Hasbro’s aggressive production and releases of Magic: The Gathering products have not gone unnoticed, particularly by Bank of America stock analyst Jason Haas. Haas gave a negative outlook for Hasbro stock, downgrading the stock from "buy" to "underperform".
Why is this a big deal? For one thing, Magic: The Gathering makes up about a third of Hasbro’s operating profit. If the MTG brand were to drop in its profitability, it would make for a very costly dent.
Overall, the Hasbro investors have been feeling the burn for some time. Hasbro’s share price last November 12 was reportedly a drop of 35% over the past year. Yahoo! Finance specifically pointed out the drop of earnings per share (EPS):
Unfortunately Hasbro reported an EPS drop of 8.8% for the last year. This reduction in EPS is not as bad as the 35% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
While Hasbro stock has been taking a pounding in the past months, much of the sudden negative impact on it this past week has been from the report of Bank of America.
Haas went as far as stating that Hasbro is "killing its golden goose" due to the overproduction of sets and unpopular changes to the game:
The primary concern is that Hasbro has been overproducing Magic cards which has propped up Hasbro’s recent results but is destroying the long-term value of the brand.
Plus, Haas gave a particular example of how Hasbro is devaluing its cards with the upcoming Magic: The Gathering 30th Anniversary set:
This set has devalued many high-value cards, and collectors are concerned that Wizards will reprint more.
The 30th Anniversary set is intended to celebrate the three decades of the world’s most popular collectible card game. The cards in the commemorative set reprints the most iconic cards from Magic: The Gathering’s early years.
The 30th Anniversary set will be distributed in the following setup: packs will each contain 15 cards; 13 of these cards with the modernized frame and borders.
As far as the rarities, each Magic: The Gathering 30th Anniversary pack will have 1 rare, 3 uncommons, 7 commons, and 2 basic lands. Plus, these packs will have one basic land that has the retro frame and one additional retro frame card. There will also be one token card. You can find the full gallery of the MTG 30th Anniversary set right here.
While these cards will have a different design for the backs, some will have different borders, and none of these cards are going to be tournament legal. But some MTG fans are already in a frenzy to acquire them, particularly the reprinted high-value cards such as the iconic Black Lotus, the Dual Lands, and all the Blue Power spells (Ancestral Recall, Braingeyser, Psionic Blast, Timetwister, and Time Walk.).
And while Hasbro stock has experienced a severe downgrade, Hasbro is pushing forward with more new sets in the next few years. Earlier this year, Wizards of the Coast released the Universes Beyond crossovers with The Transformers and Games Workshop's Warhammer 40K. Moreover, 2023 will see more of these collaborations with The Lord of the Rings, Doctor Who, Final Fantasy, and Assassin's Creed. These are aside from the standard expansions, such as the recent The Brothers' War expansion.
Only time will tell if Hasbro’s decision to double-down on producing more Magic: The Gathering products, rather than dialing things down ,will payoff for the company’s profit in the long run.
As of November 17, 2022, the pre-market stock price for Hasbro, Inc. (NASDAQ:HAS) was at $55.62.
The Magic: The Gathering 30th Anniversary Edition will be available for purchase on November 28, 2022 for $999.